The Future of Australian Aged Care: Do Community Based Not-For-Profits Have a Place?

Aged care service provision in Australia is undergoing massive and rapid change, involving a necessary rethink of existing modes of delivery that have dominated the industry for years. These changes to existing models are not being brought about by the new private sector players, who increasingly are playing an active role, but by the changing demographics of our ageing population and the shift in behaviours and expectations of people as they age. So what is the future of Australian Aged Care?

Do Community Based Not-For-Profits Have a Place?

There are five key factors re-shaping community based Not-For-Profits in the aged care sector:

Changing community expectations and change in demographics, with increasing complexity in demand. Nearly all the social indicators – inadequacy of government pensions, number of people over the age of 65, increasing numbers requiring care – are getting worse and now becoming constant factors.

The move by government to transfer responsibility for decision making to the individual for the provision of care services, which is based on the belief that free markets can exist in aged care services and are advantageous to the aged community. This calls for a move from the supply to demand-driven model of service delivery, and in greater contest-ability and competition in service provision.

The desire by governments for consolidation, meaning essentially the reduction of the number of service providers that is being driven by preference of government for greater scale in service providers. Concurrently we are seeing the downsizing of the public sector which will also see a need to deal with fewer number of contracted providers as a practical outcome.

Emerging aged care “social services jargon” around social impact investment, social enterprise activity, public sector supply chain and social entrepreneurialism.

Increasing complexity of the system in which NFPs operate, within the context of declining government funding, workforce challenges, fragmented system with lack of integration of core services, and increase in governance requirements.

Increasingly, people expect to age well and actively, empowered by choice in and control over their lives – an expectation clearly identified in the government’s consumer directed care reforms that came into effect from February 2017.

The private sector is very active in responding to this shift. However, they are not the cause of disruption in the aged care sector, but the result of it. New players such as Better Caring are gaining traction as consumers seek out alternatives to what currently exists – alternatives that provide them with flexibility, better value for money and ultimately better life outcomes.

The disruption of the current NFP aged care model isn’t just about the client. The traditional model has been built around a volunteer workforce that have expressed a willingness to be allocated by the service provider to a client, as part of giving back to their community. In the consumer directed care reforms comes the enabling, whenever possible, of a direct relationship between a care worker and their client. This is now more important than ever before. Consumers are experts in their own life and in the best position to judge who is right to provide services to them. That doesn’t mean they don’t require support to do so – but the level of support will differ from person to person.

The NFP aged care service provider has traditionally relied heavily upon volunteers who are willing to give back to their community by assisting elderly people live independently. However the new way is for care workers who are often better trained than volunteers having the choice to work for individuals who have chosen them. In a society that is increasingly moving towards independent workforces, the desire for care workers to drive their own career is only going to grow. And if we are to attract the large and diverse workforce we need to support our ageing population, we need to attract a mix of people who prefer the flexibility that can come with running your own business, alongside people who prefer to be employed.

From a remuneration perspective, enabling care workers to set their own rates is something quite new. Independent contractors who deliver a high quality service will be greatly in demand and their hourly rates will reflect this over time, offering them the potential to earn more. In this context, training and competency assessments will remain particularly relevant, as workers invest in themselves and their business.

In this new market-driven world, community based NFPs aged care service providers will continue to play a vital role in supporting the neediest in society. However, in a confusing and changing landscape, some of the neediest will be those with limited understanding about the choices they now have. A crucial role for NFP’s moving forward will be to enable this understanding. Both traditional and emerging players have a responsibility to provide clear, transparent information to all members of the community to enable them to make informed and balanced decisions about their own life and care.

To merge, amalgamate or partner?

There is now little doubt that merger, amalgamation and partnership activity in the aged care sector has reached unprecedented levels. An Australian Institute of Company Directors Report found that 40 per cent of NFP aged care boards had discussed a merger in the past 12 months, and half of them believed it would happen.

At a Better Boards conference in July 2016, a show of hands among the 500-odd senior executives and directors of NFPs indicated that at least half were currently exploring or considering an amalgamation, merger or partnership with another organisation.

There are predictions that within the next decade the current aged care sector ownership model will be inverted – NFPs will make up just a third of the sector, for-profit providers making up 60 per cent and government the remaining 10 per cent.

Traditional community based NFPs in the aged care sector have some real challenges that they need to face up to. This includes looking at how they are doing business and what they can do differently to respond to this new world. Part of this must involve going beyond traditional partnerships, to exploring the capital and resources that the NFP sector has tied up in its infrastructure and how this can be re-deployed back into services.

Clearly then the question of whether to go it alone or find strength in numbers is one increasingly facing NFP aged care boards and senior executives of NFPs, as they seek to respond to the changing landscape. But what determines whether they seek a merger, amalgamation or a partnership?

Ultimately this should be driven by NFP Boards rationale around strategic intent? What do we want out of this? Do we want to grow? Are we seeking to join another because the competition is too tough? Or we can’t see ourselves in the future as we are?

Beware the pitfalls

“Cultural misalignments” are a major risk for any NFP and has been the most common cause of a merger or amalgamation not proceeding. It’s the values, vision, mission and chemistry; the psychology of the organisation versus mind. That is single biggest reason as to why two organisations won’t fit.

The other issue, which unfortunately exists in many small NFPs is the “power, politics and personalities”. The human factor can be huge. You can have a process going along, seemingly smoothly, but behind the scenes ego and personality kicks in, and it ultimately sabotages all the time and effort other people have put into bringing the organisations together. You can never underestimate the power, politics and personalities – and everything in that mix.

Is your Not-For-Profit Fit For Purpose?

So, the real question is whether the large number of community based NFPs are fit for purpose in the context of the mission and the services or products they offer. And is our NFP achieving the highest return for their beneficiaries for the assets they use?

Answering these questions requires NFP boards, CEOs, and those donating to, or contracting with, NFPs to have high expectations and to challenge NFPs to ensure their resources are achieving the outputs and outcomes needed by their beneficiaries now and in the future.

If we continue to base our views of the NFP sector on incorrect assumptions and perceptions we run the risk of doing considerable damage to a national asset that contributes substantially to Australia’s economic and social prosperity.

The question of how many aged care NFPs Australia should have is going to be a topic for many years to come. Merger, amalgamation and partnership activity is at unprecedented levels in aged care, as the not-for-profit sector faces profound challenges. But how does an organisation decide whether to join forces or go it alone? What determines success? And what are the pitfalls?

Are you prepared for the Future of Australian Aged Care?
If this blog has inspired you to formulate a better Strategy for your NFP aged care business we would love to talk with you about the detailed plans.